Birmingham Water Works reduces proposed rate increase

The Birmingham Water Works Board has lowered its proposed rate increases for water customers in a revised budget proposal that's likely to come to a vote this week.

The revised spending plan contains a 3.9 percent rate increase, reduced from the 5.9 percent increase that was recommended previously.

Some customers said the plans for the larger increase were a bad idea when Jefferson County sewer customers face rate increases could face steep rate increases.

The Water Works has about 210,000 individual account connections. About 60 percent of those are joint water and sewer customers.

"The board did consider the projected rate increases from the sewer and wanted to minimize our rate increases to work with both sets of customers," Water Works General Manager Mac Underwood said Monday.

The new $92.3 million proposed budget is more than $2 million smaller than the original $94.4 million plan, which called for the larger rate increase and employee raises of as much as 6.5 percent. The new plan proposes pay raises of as much as 3.25 percent.

Underwood said the utility was able to adjust the proposed rates in part by lowering projected power and chemical costs.

The revised pay raise recommendations are based on the Consumer Price Index and recent pay increases announced by the Social Security Administration. The CPI is 3.8 percent.

"We reviewed the CPI and we adjusted merit increases and cost-of-living adjustments to be just slightly below that number," Underwood said.

Board member Anthony Barnes called the new numbers a compromise that he expects to be adopted unanimously.

"We are sympathetic to our citizens, but our citizens would frown on us if we let the water system become like the sewer system and we ended up with rate increases for years," Barnes said. "We can't allow our water system to disintegrate."

Barnes noted that the utility has to pay for continuing expenses. That includes $45 million in debt service paid this year and an expected $53 million due in fiscal 2012.

"Water is free, but to treat it and make it drinkable and sustainable and get it into your bathtub and your kitchen sink is where the cost is," he said. "We have very good water, not because it comes to us drinkable like that, but because of what it costs to treat the water."

Board member Ann Florie said the new numbers are part of a better plan.

"It was responsive to the public," Florie said. "I hope the trend continues in that direction and our focus going forward is on managing expenses."

Board member David Herring said the utility's reduction is a response to sewer hikes that will hit retired and lower income customers hardest.

"We'd love to give as much as we possibility can," he said, regarding raises. "We feel we have a responsibly to the public as well as to the employees. This is a happy compromise."

Underwood said the board will soon begin work on a five-year plan that should be complete in February. That plan will include a schedule for future rate increases.

"In June of this year, the board received a rating increase from Moody's from A to AA that saved the board and the ratepayers approximately $8 million in debt service costs," Underwood said. "Therefore, when we do our five-year projection, we've got to do what we can do to maintain our rating."